The Ratan Watal committee, which was tasked by the government to recommend proper measures for encouraging digital payment in India, may have envisaged a rosy picture for digital transactions and recommended sweeping changes to regulation around payments.

However, industry executives and experts feel that the report is extremely futuristic and almost verges on wishful thinking as several recommendations are likely to face implementation issues.

One such recommendation has been interoperability which has also been a long-standing demand of mobile wallet companies. The committee recommends that payments be made interoperable between bank and non-banks as well as within non-banks and suggests mapping of digital wallet accounts to mobile phone numbers and Aadhaar.

But this is likely to lead to issues around safety and increase the scope of money laundering because of the lack of standardised norms between various service providers, experts feel.

"Tracking will become extremely difficult if there is an easy flow of funds between wallets and then there could be ample scope for money laundering," said Ashvin Parekh, managing partner at Ashvin Parekh Advisory Services.

The committee has called for "open access" to payment systems, including RTGS (Real Time Gross Settlement Systems), even for non-bank payment service providers. The report also calls for outsourcing the function of operation of payment systems like RTGS and NEFT (National Electronic Funds Transfer).

However, industry experts doubt whether PPI (Prepaid Payments Instruments) licence holders will be given access to railroads of payments like IMPS (Immediate Payment Services) even though wallet players think it is crucial for them to do faster settlements. "This is a core function of the payment system, very regulated, and may not be accepted by RBI," said angel investor Mohandas Pai.

"This can clearly meet out the infrastructure related flaws in the existing payments systems and meet out the objectives of 24x7 power and network availability, but a detailed costs benefit analysis needs to be carried out for the outsourcing function. We will also need to ascertain the risks associated with respect to sharing of the payment sensitive data with the external players, as security of confidential data is an important area to be considered," said a KPMG spokesperson.

The positive side

Despite concerns, several recommendations of the Watal committee, if implemented, are likely to open up more business opportunities for digital payment companies. The committee has recommended that consumers be allowed to pay taxes and other government payments using debit cards and digital wallets, in addition to net banking.

"The Central Board of Direct Taxes and the Central Board of Excise and Customs should develop an e-commerce-based model where their web portals generate tax challans and accept payments from all electronic modes," the report stated.

"If a customer is allowed to pay taxes through the wallet, it increases the reason to hold money in the wallet. However, these recommendations show that wallets will need to become payment banks and offer more services to the customer," said SV Subramanya, a former venture capitalist at Bessemer Venture Partners and founder of wealth management app Fisdom.

Some limitations

Industry insiders flag the fact that with more services come increased cost and that is something that wallet companies and the regulator will need to balance out. "Cost and efficiency will drive adoption of more and more intermediaries participating in the system. The trend is towards a definite attempt to empower bank accounts," said Parekh.

Industry insiders say the real game changer would be free flow of funds between mobile wallets and bank-sponsored wallets, and have called for access for wallet players to the Unified Payment Interface (UPI) infrastructure.

"Wallet companies should be given access to Unified Payment Interface. They should be allowed to undertake free movement of funds across mobile wallets and companies that run the card payments infrastructure along with banks," said Pramod Saxena, founder, Oxigen Services, which runs the Oxigen mobile wallet service.